MAGA accounts

(a)

In general

Subchapter F of chapter 1 is amended by adding at the end the following new part:

MAGA accounts

530A.

MAGA accounts

(a)

General rule

A MAGA account shall be exempt from taxation under this subtitle. Notwithstanding the preceding sentence, such account shall be subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable organizations).(b)

MAGA account

For purposes of this section—(1)

In general

The term money account for growth and advancement or MAGA account means a trust created or organized in the United States for the exclusive benefit of an individual and which is designated (in such manner as the Secretary shall prescribe) at the time of the establishment of the trust as a MAGA account, but only if the written governing instrument creating the trust meets the following requirements:(A)The individual establishing the account shall provide to the trustee the social security number of such individual and of the account beneficiary.(B)Except in the case of a qualified rollover contribution described in subsection (e), no contribution will be accepted—(i)before January 1, 2026,(ii)unless it is in cash,(iii)unless the account beneficiary has not attained age 18, and(iv)if such contribution would result in aggregate contributions for the taxable year exceeding the contribution limit specified in subsection (c)(1).(C)No distribution (other than a distribution of a qualified rollover contribution) will be allowed—(i)before the date on which the account beneficiary attains age 18, or(ii)in the case of such an account the account beneficiary of which has not attained age 25, if the aggregate distributions from such account exceeds the amount that is ½ the cash equivalent value of the account on the date on which the account beneficiary attains age 18.(D)The account beneficiary has not attained age 8 on the date of the establishment of the account.(E)The trustee is a bank (as defined in section 408(n)) or another person who demonstrates to the satisfaction of the Secretary that the manner in which that person will administer the trust will be consistent with the requirements of this section or who has so demonstrated with respect to any individual retirement plan.(F)The interest of an individual in the balance of his account is nonforfeitable.(G)The assets of the trust shall not be commingled with other property except in a common trust fund or common investment fund.(H)No part of the trust funds will be invested in any asset other than eligible investments.(2)

Eligible investments

The term eligible investments means stock of a regulated investment company (within the meaning of section 851) which—(A)tracks a well-established index of United States equities (or which invests in an equivalent diversified portfolio of United States equities),(B)does not use leverage,(C)minimizes fees and expenses, and(D)meets such other criteria as the Secretary determines appropriate for purposes of this section.(3)

Account beneficiary

The term account beneficiary means the individual on whose behalf the MAGA account was established.(c)

Treatment of contributions

(1)

Contribution limit

The contribution limit for any taxable year is $5,000.(2)

Contributions from tax exempt sources and rollover contributions

The amount contributed to a MAGA account for purposes of paragraph (1) shall be determined without regard to—(A)a qualified rollover contribution,(B)any contribution from the Federal Government or any State, local, or tribal government, or(C)any contribution made through the program established under subsection (l).(3)

Cost-of-living adjustment

(A)

In general

In the case of any taxable year beginning in a calendar year after 2026, the $5,000 amount under paragraph (1) shall be increased by an amount equal to—(i)such dollar amount, multiplied by(ii)the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting calendar year 2025 for calendar year 2016 in subparagraph (A)(ii) thereof.(B)

Rounding

If any increase under subparagraph (A) is not a multiple of $100, such amount shall be rounded to the next lower multiple of $100.(d)

Distributions

(1)

Amounts allocable to investment in the contract

A distribution from a MAGA account of an amount allocable to the investment in the contract shall not be includible in the gross income of the distributee.(2)

Amounts allocable to income on the contract used for qualified expenses

A distribution from a MAGA account of an amount allocable to income on the contract and which is used exclusively to pay for qualified expenses shall be includible in net capital gain of the distributee under section 1(h)(12).(3)

Amounts includible in gross income

Any distribution from a MAGA account which is not described in paragraph (1) or (2) shall be includible in the gross income of the distributee.(4)

Qualified expenses

For purposes of this subsection, the term qualified expenses means any of the following expenses paid or incurred for the benefit of the account beneficiary:(A)Qualified higher education expenses (as defined in section 529(e)(3)) determined without regard to section 529(c)(7).(B)Qualified post-secondary credentialing expenses (as defined in section 529(f)).(C)Under regulations provided by the Secretary, amounts paid or incurred with respect to any small businesses for which the beneficiary has obtained any small business loan, small farm loan, or similar loan.(D)Any amount used for the purchase (as defined in section 36(c)(3)) of the principal residence (as used in section 121) of the account beneficiary if such account beneficiary is a first-time homebuyer (as defined in section 36(c)(1)) with respect to such purchase.(5)

Exceptions

Paragraphs (2) and (3) shall not apply to any distribution which is a qualified rollover contribution.(6)

Additional tax on certain distributions

In the case of a distributee who has not attained age 30, the tax imposed by this chapter on the account beneficiary for any taxable year in which there is a distribution from a MAGA account of such beneficiary which is includible in gross income under paragraph (3) shall be increased by 10 percent of the amount which is so includible.(e)

Qualified rollover contribution

For purposes of this section, the term qualified rollover contribution means an amount which is paid in a direct trustee-to-trustee transfer from a MAGA account maintained for the benefit of the account beneficiary to a MAGA account maintained for such beneficiary.(f)

Treatment after death of account beneficiary

Rules similar to the rules of section 223(f)(8) shall apply for purposes of this section.(g)

Determinations of aggregate distributions and investment in contract in the case of certain rollover contributions

In the case of a qualified rollover contribution which is described in subsection (e)(2), any determination required under this section of the amount of the investment of the contract or of aggregate distributions from the MAGA account shall be determined with respect to the aggregate of such amounts for all MAGA accounts of the same account beneficiary.(h)

Custodial accounts

For purposes of this section, a custodial account shall be treated as a trust under this section if—(1)the custodial account would, except for the fact that it is not a trust, constitute a trust which meets the requirements of subsection (b)(1), and(2)the assets of such account are held by a bank (as defined in section 408(n)) or another person who demonstrates, to the satisfaction of the Secretary, that the manner in which he will administer the account will be consistent with the requirements of this section.

For purposes of this title, in the case of a custodial account treated as a trust by reason of the preceding sentence, the person holding the assets of such account shall be treated as the trustee thereof.

(i)

Termination

(1)

Age 31

Upon the date on which the account beneficiary attains age 31, a MAGA account shall cease to be a MAGA account and the amount in such account shall be treated as distributed for purposes of subsection (d).(2)

Multiple accounts of one beneficiary

(A)

In general

In the case of any duplicate MAGA account of any account beneficiary other than a MAGA account which is established by the deposit through a qualified rollover contribution of the entire amount of another MAGA account of the account beneficiary—(i)such duplicate MAGA account shall cease to be a MAGA account and the amount in such account shall be treated as distributed for purposes of subsection (d), and(ii)there is imposed an excise tax on the account beneficiary in an amount equal to so much of cash value of the account as is allocable to income on the contract.(B)

Withholding requirement

In the case of an account terminated under subparagraph (A), the trustee shall deduct and withhold upon the amount to be distributed the amount in excess described in subparagraph (A)(ii).(C)

Notification

The Secretary, upon determining that a duplicate account exists, shall provide a notice to the account beneficiary of such duplicate account (and the account custodian, in the case of a custodial account) and to each trustee of any MAGA account of the account beneficiary of such duplicate account which identifies each MAGA account of such beneficiary and the trustee of each such account.(D)

Duplicate account

For purposes of this paragraph, the term duplicate account means—(i)in the case of an account beneficiary for the benefit of whom an account was established by the Secretary under section 6434, any other MAGA account of such account beneficiary, or(ii)in the case of any other account beneficiary, any MAGA account established after the first MAGA account established for the benefit of such account beneficiary.(j)

Investment in the contract

For purposes of this section, rules similar to the rules applied to a qualified tuition program (as defined in section 529(b)) under section 72(e)(9) shall apply for purposes of determining the investment in the contract, except that such amount shall be determined without regard to any contribution which is described in subsection (c)(2).(k)

Reports

The trustee of a MAGA account shall make such reports regarding such account to the Secretary and to the beneficiary of the account with respect to contributions, distributions, the amount of investment in the contract, and such other matters as the Secretary may require. The reports required by this subsection shall be filed at such time and in such manner and furnished to such individuals at such time and in such manner as may be required.(l)

Contributions to predominately unrelated children

The Secretary shall establish a program through which contributions may be made to the MAGA accounts of a large group of account beneficiaries if—(1)the contribution is made by any person described in any paragraph of section 501(c) and exempt from taxation under section 501(a),(2)such accounts are selected on the basis of the location of the residence of the account beneficiaries, the school district in which such beneficiaries attend school, or another basis the Secretary determines appropriate, and(3)all individuals who are account beneficiaries of such an account who meet the selected criteria receive an equal portion of the contribution.

(b)

Distribution taxed at same rate as net capital gains

Section 1(h) is amended by adding at the end the following new paragraph:

(12)

Distributions from MAGA account taxed as net capital gain

For purposes of this subsection, the term net capital gain means the net capital gain (determined without regard to this paragraph) increased by the amount includible in net capital gain under this paragraph by reason of section 530A(d)(2).

(c)

Tax on excess contributions

(1)

In general

Section 4973(a) is amended by striking or at the end of paragraph (5), by inserting or at the end of paragraph (6), and by inserting after paragraph (6) the following new paragraph:

(7)a MAGA account (as defined in section 530A(b)),

(2)

Excess contribution

Section 4973 is amended by adding at the end the following new subsection:

(i)

Excess contributions to a MAGA account

For purposes of this section, in the case of MAGA accounts (within the meaning of section 530A), the term excess contributions means the sum of—(1)the amount by which the amount contributed for the calendar year to such account (other than qualified rollover contributions (as defined in section 530A(e))) exceeds the contribution limit under section 530A(c)(1) (determined without regard to contributions described in section 530A(c)(2)), and(2)the amount determined under this subsection for the preceding calendar year, reduced by the excess (if any) of the maximum amount allowable as a contribution under section 530A(c)(1) (as so determined) for the calendar year over the amount contributed to the account for the calendar year (other than qualified rollover contributions (as so defined)).

(d)

Disclosure of return information To facilitate certain contributions

Section 6103(l) is amended by adding at the end the following new paragraph:

(23)

Disclosure of return information to enable certain contributions to MAGA accounts

Upon written request signed by the head of the bureau or office of the Department of the Treasury requesting the inspection or disclosure, the Secretary may disclose the following return information with respect to a MAGA account (as defined in section 503A(b)) to officers and employees of such bureau or office to the extent that such disclosure is necessary to carry out section 530A(l):(A)Information necessary to identify the account holders in a particular class of beneficiaries identified by a donor as the intended recipients.(B)The name, address, and social security number of a beneficiary.(C)The account custodian and the address of such custodian.(D)The account number.(E)The routing number.(F)To the extent determined by the Secretary in regulations, such other return information as the Secretary determines necessary to ensure proper routing of funds.

Return information disclosed under this paragraph may only be used to identify account holders in a particular class of beneficiaries or for the proper routing of funds and may not be redisclosed by the Secretary.

(e)

Failure To provide reports on MAGA accounts

Section 6693(a)(2) is amended by striking and at the end of subparagraph (E), by striking the period at the end of subparagraph (F) and inserting , and, and by adding at the end the following new subparagraph:

(G)section 530A(h) (relating to MAGA accounts).

(f)

Conforming amendment

The table of parts for subchapter F of chapter 1 is amended by adding at the end the following new item:

Part IX. MAGA accounts

(g)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2024.

MAGA accounts contribution pilot program

(a)

In general

Subchapter B of chapter 65 is amended by adding at the end the following new section:

6434.

MAGA accounts contribution pilot program

(a)

In general

In the case of any taxpayer with respect to whom an eligible individual is a qualifying child, there shall be allowed a one-time credit of $1,000 with respect to each such eligible individual who is a qualifying child of such taxpayer which shall be payable by the Secretary only to the MAGA account with respect to which such eligible individual is the account beneficiary.(b)

Account established by Secretary

(1)

In general

In the case of any eligible individual that the Secretary determines is not the account beneficiary of any MAGA account as of the qualifying date of such eligible individual, the Secretary shall establish an account for the benefit of such eligible individual.(2)

Qualifying date

For purposes of paragraph (1), the term qualifying date means, with respect to an eligible individual, the first date on which a return of tax is filed by an individual with respect to whom such eligible individual is a qualifying child with respect to the taxable year to which such return relates.(3)

Notification

In the case of any eligible individual for the benefit of whom the Secretary establishes an account under paragraph (1), the Secretary shall—(A)notify any individual with respect to whom such eligible individual is a qualifying child for the taxable year described in paragraph (2) of the establishment of such account, and(B)shall provide an opportunity to such individual to elect to decline the application of this subsection to such qualifying child.(4)

Determination of default trustee

For purposes of selecting a trustee for an account established under paragraph (1), the Secretary shall take into account—(A)the history of reliability and regulatory compliance of such trustee,(B)the customer service experience of such trustee,(C)the costs imposed by such trustee on the account or account beneficiary, and(D)to the extent practicable, the preferences of any individual described in paragraph (3)(A) with respect to such eligible individual.(c)

Eligible individual

For purposes of subsection (a), the term eligible individual means an individual—(1)who is born after December 31, 2024, and before January 1, 2029, and(2)who is a United States citizen at birth.(d)

Social security number required

(1)

In general

No credit shall be allowed under subsection (a) to a taxpayer unless such taxpayer includes on the return of tax for the taxable year—(A)such individual’s social security number,(B)if such individual is married, the social security number of such individual’s spouse, and(C)the social security number of the eligible individual with respect to whom such credit is allowed.(2)

Social security number defined

For purposes of paragraph (1), the term social security number shall have the meaning given such term in section 24(h)(7).(e)

Definitions

For purposes of this section—(1)

Qualifying child

The term qualifying child has the meaning given such term in section 152(c).(2)

MAGA account; account beneficiary

The terms MAGA account and account beneficiary have the meaning given such terms in section 530A(b).

(b)

Penalty for negligent claim or fraudulent claim

Part I of subchapter A of chapter 68 of subtitle F is amended by adding at the end the following new section:

6659.

Improper claim for MAGA account contribution pilot program credit

(a)

In general

In the case of any taxpayer that makes an excessive claim for a credit under section 6434—(1)if such excess is a result of negligence or disregard of the rules or regulations, there shall be imposed a penalty of $500, or(2)if such excess is a result of fraud, there shall be imposed a penalty of $1,000.(b)

Definitions

The terms negligence and disregard have the same meaning as when such terms are used in section 6662.

(c)

Omission of correct social security number treated mathematical or clerical error

Section 6213(g)(2) is amended by striking and at the end of subparagraph (U), by striking the period at the end of subparagraph (V) and inserting , and, and by inserting after subparagraph (V) the following new subparagraph:

(W)an omission of a correct social security number required under section 6434(d)(1) (relating to the MAGA accounts contribution pilot program).

(d)

Clerical amendments

(1)The table of sections for subchapter B of chapter 65 is amended by adding at the end the following new item:

Sec. 6434. MAGA accounts contribution pilot program.

(2)The table of sections for part I of subchapter A of chapter 68 of subtitle F is amended by inserting after the item relating to section 6658 the following new item:

Sec. 6659. Improper claim for MAGA account contribution pilot program credit.

(e)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2024.